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After a two-year investment lull, Europe's technology start-ups are experiencing a resurgence: the variety of deals amongst young corporations is increasing and enterprise capitalists are raising recent capital.
Creandum, an early backer of Spotify, Klarna and Depop, unveiled a €500 million fund on Monday, making it the newest Europe-focused private technology investor to secure fresh capital for startups this yr.
This capital raise follows similarly large deals including Accel Europe, which launched a $650 million fund last month, and Plural, a London and Tallinn-based firm focused on “deep tech” startups that raised €500 million. Plural added one other €100 million to its fund last month following its first close in January.
Creandum's fund was launched “in record time,” in keeping with general partner Carl Fritjofsson. “There is a dramatic change in sentiment, interest and activity across the industry,” he said.
After the tech investment boom triggered by the Covid-19 pandemic got here to a sudden halt resulting from inflation, rising rates of interest and geopolitical tensions, European startups were forced to chop costs as enterprise capital investment dried up. Some major U.S. tech investors, including Tiger Global and Coatue, pulled out of European deals.
But enterprise capitalists say the market has begun to vary in the primary months of 2024, as a brand new trend toward artificial intelligence startups coincides with a pointy rise within the valuations of major technology corporations on Wall Street.
“We haven’t yet completely overcome the overhangs of the height years, but the primary green shoots are visible throughout us,” says Tom Wehmeier, who leads the insights team at Atomico, one in every of Europe's largest enterprise capital firms. “We have left the recovery phase behind us and are back in a growth phase.”
Wehmeier predicts that after the decline in 2023, private tech investments in European start-ups will grow again this yr. “The market is more energetic at any time limit than we’ve seen before 2021,” he said, pointing to a few consecutive quarters of increased investment in “Series B” deals.
“Based on the info we see and our every day work, we’re really enthusiastic about 2024,” said Sabina Wizander, partner at Creandum in Stockholm. “More quality corporations are daring to lift money since the fundraising environment is more predictable.”
Many startups were forced to chop costs and concentrate on profitability because the market turned in 2022. Those that survived the funding freeze are actually more sustainable, investors say, while revenue growth across the board has begun to speed up.
Even some investors from Silicon Valley have returned to Europe: Andreessen Horowitz and IVP have opened offices in London in recent months.
Between 2007 and 2021, Creandum earned back almost seven times its investments after selling its company shares. One in six corporations wherein Creandum invested reached a valuation of greater than $1 billion.
Jon Biggs, a partner at Top Tier, one in every of Creandum's investors, said the figures showed that European enterprise capital groups could deliver returns on par with their Silicon Valley rivals – an issue that has long preoccupied investors within the region. “The firm sits comfortably at the highest of worldwide enterprise capital firms,” he said.
Not every European fund has succeeded in raising capital so easily. London-based Atomico is in the ultimate stages of its largest capital raise so far, searching for as much as $1.35 billion for its enterprise and growth funds, in keeping with people conversant in the matter. Although it expects to shut the financing in the approaching months, the method has taken greater than a yr.
That reflects each the dimensions of the deal and continued investor caution about funding later-stage corporations at a time when there have been few successful IPOs, these people said. Atomico declined to comment on its fundraising plans.
